Penalty Charge Complaints Increasing
Penalty charges levied by banks and building societies have become a rapidly increasing source of complaint from consumers.
This time last year the Financial Ombudsman received around 100 calls each week on the subject of penalty charges. However, this has now increased to 1000 complaints every day. In fact after a recent BBC consumer program there were 3000 calls in one day.
Endowment policies used to be the issue concerning most callers, but penalty charges currently generate far more complaints than any other subject.
Over the last year some consumer groups have claimed that penalty charges are illegal and can be reclaimed through court action. The Ombudsman begins investigations on about 150 cases each week but most callers are asking for advice on how to go about getting their money back. On the whole, where there has been an investigation by the Ombudsman, banks and building societies have settled the claim before the judgement has been given.
After an investigation last year the Office of Fair Trading (OFT) said that credit card penalty fees can only be charged at a level to cover costs. The OFT also said that this should apply to bank overdrafts. However, banking groups argue that when it comes to unauthorised overdrafts they are charging for a service.
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